1. GIC Re shares still trading 10% below IPO price. Tempted to sell out? ‘Hold’, says Deutsche Bank

GIC Re shares still trading 10% below IPO price. Tempted to sell out? ‘Hold’, says Deutsche Bank

The shares of state-run General Insurance Corporation of India (GIC Re) have seen muted performance on the bourses, after they listed at a 14.5% discount to issue price of Rs 912.

By: | Updated: November 27, 2017 10:59 AM
GIC Re shares were trading at Rs 793, down by more than 0.35% since their previous close on Friday. (Image: Reuters)

The shares of state-run General Insurance Corporation of India (GIC Re) have seen muted performance on the bourses, after they listed at a 14.5% discount to issue price of Rs 912. In fact, the shares are still trading below their issue price. GIC Re shares were trading at Rs 793, down by more than 0.35% since their previous close on Friday. Global research firm Deutsche bank has initiated coverage on the shares with a hold call. The firm has as a target price of Rs 830. Deutsche Bank’s target price implies an upside of nearly 5% from the current market prices. The research firm says that there are concerns in the crop business, however, the bank is not overly worried. The firm has predicted an improvement in combined ratio from hereon. Better growth fundamentals will offset rising competition, noted the firm.

Track live stock price: General Insurance Corporation of India

The IPO of GIC Re had seen low demand from retail investors, as their portion was bid for a total of 60%, even as QIB portion saw demand to the tune of 2.27 times. Many brokerages had a subscribe rating on the shares with a long-term view. CRISIL Research had said that GIC Re has a market share of 60% and is poised to benefit as reinsurance premiums in India are expected to grow 11-14 per cent between FY17 and FY22 to Rs 70,000 crore from estimated Rs 38,800 crore in FY17.

Further, the firm observed that GIC Re was ranked as the 12th largest global reinsurer in 2016 and the third largest Asian reinsurer in 2015, in terms of gross premiums accepted. Samco Securities had said that the issue is fairly priced, and can be subscribed to given its long-term prospects. “GIC being a monopoly business should be subscribed to given that the issue is fairly priced. The stock must be held with ultra long term perspective for superior returns,” Samco said in a note.

Notably, mutual funds have taken heavy exposure to General Insurance Corporation of India with a total of Rs 203 crore invested into the shares in the month of October alone. Interestingly, UTI AMC alone invested Rs 150 crore out of the total.

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